Tax Implications of Giving a Car (or Anything Else) to a Friend or Relative

Have you ever given something of significant value to a friend or relative and wondered what the tax implications are?

In most instances, there aren’t any tax implications for giving (gifting) a car, or other asset to a friend, relative, or even stranger.

Giving a Car as a Gift

I just received this question from a reader:

My brother-in-law wrecked his car and the insurance company totaled it. He has horrible credit so we decided to give him my car so he could get out from under some bills and what was a 20% interest rate and $500/month payment on his car. He flew out here from out of state and drove the car back. My question is, are there tax implications for either of us if we gift him my car. It was in my name. He is my brother-in-law. So I can’t find much other than gifting a car to your brother.

This is certainly a very generous move. But it’s not one that has a tax effect, in most cases. In this particular situation, and most like it, the person giving the car doesn’t get a deduction and the recipient doesn’t have to claim it as income.

For a gift to be considered tax-deductible, it should be made to a qualifying charitable organization. So, unless your friend or relative is actually the organizer for a charitable organization, like George Costanza and his Human Fund, you can’t claim the gift as a charitable deduction on your taxes.

On the other side of the transaction, the recipient doesn’t have to claim the gift received as income. So, they don’t have to pay taxes on it.

Gift Tax Exclusion

But the IRS just doesn’t let you give everything away at the end of the year without getting involved. Big givers will have to file a special Form 709 if they exceed the annual gift tax exclusion ($13,000 for 2012).

Have you ever gifted a car or similar asset to an individual or charitable organization? Share your experience below…

Last Edited: March 5, 2012 @ 6:28 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

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Comments

My out of state sister and brother-in-law had their car totalled after it was wrecked in an automobile accident. They were going through tought times financially, so my wife and I decided to get them a car as a gift. I drove the car and left it with them. My problem is that it has been a while since we gave them, even after letting them know that it was a gift, they have not changed registration plate to their state, and I keep getting toll road charges and other violations in the mail from their state. Efforts to have them register the car in their names have not produced any fruit. I want them to keep the car. Is there any way to legally “disown” that car?

About PT

Hi, I'm Philip Taylor. I'm a husband, father, blogger, CPA, and entrepreneur. I love learning to do more with my money and sharing it all here with you. Join in on the conversation and start improving your financial life today. Read more...

Disclosures:

The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice.

In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.